The emerging FTA contour

By Manu Sanan: Oct 25, 2011

Free Trade Agreements (FTAs) are instruments of bilateral trade liberalization and going by recent statistics, they have become the most popular method of pursuing liberalisation of commerce. Ever since the weakening of trade liberalization agenda at the multilateral level due to massively fragmented interests – free trade has shifted to a largely regional/bilateral plane thanks to commercial and political expediency. Almost 300 preferential trade agreements (notified and not notified) were in force in 2010 and according to the WTO, 13 is the average number of Preferential Trade Agreements (PTAs) that a WTO member is party to.

India too, is looking to strengthen its FTA portfolio with the recent notification of the Comprehensive Economic Co-operation Agreement (CECA) with Malaysia and Comprehensive Economic Partnership Agreement with Japan (CEPA). In addition, India is expected to ink a deal with the European Union in the near future.

As trade agreements are usually undertaken by complimentary economic structures, the prospects of commercial growth are naturally high. The general setting of RTAs is an exception to the uniform MFN practice mandated by the WTO. However, though both goods and services may be liberalized bilaterally banking on the MFN exceptions in the GATT and GATS, this is not possible with intellectual property (IP).

This is because, the TRIPS agreement does not have an MFN exception and therefore though IP may be negotiated bilaterally – its liberalization is always at the multilateral level – leading to uniform layers dubbed as the IP ratchet. This is possibly one of the reasons why India remains reluctant to negotiate IP at the bilateral level, evident by the EU-India FTA standoff, and has only re-affirmed TRIPS obligations in all international commitments including the CEPA and the CECA.